China Stocks Gain Most in Three Weeks on PMI; Anhui Conch Rises

China’s stocks rose, driving the
benchmark index up by the most in three weeks, after data showed
the nation’s manufacturing industry expanded for the first time
since July.

Anhui Conch Cement Co. (600585) and Zoomlion Heavy Industry Science
& Technology Co. gained at least 3 percent after the official
Purchasing Managers’ Index rose to 50.2 in October from 49.8 in
September. A number above 50 indicates expansion. China Vanke
Co. (000002) and Poly Real Estate Group Co. led a gauge of developers to
the highest level in three weeks as Shenyin & Wanguo Securities
Co. said property sales may have improved last month.

“The PMI data brought some optimism to the market and sent
signals that the economy is stabilizing,” said Dai Ming, a fund
manager at Hengsheng Hongding Asset Management Co. in Shanghai,
which manages $190 million.

Today’s PMI report from the National Bureau of Statistics
and China Federation of Logistics and Purchasing matched the
median forecast of 30 economists in a Bloomberg survey. A
separate PMI from HSBC Holdings Plc and Markit Economics
indicated that manufacturing contracted at a slower pace in
October.

The data add to expectations of a pickup in the economy
this quarter after industrial production, exports and retail
sales accelerated in September. Growth slowed to 7.4 percent
last quarter, a three-year low.

Volumes, Volatility

The Shanghai gauge dropped 0.8 percent last month on
concern earnings growth will decelerate. Some 948 of the index’s
companies reported third-quarter profit with an average decline
of 1.7 percent from a year earlier, data compiled by Bloomberg
show.

The Shanghai index trades at 10 times estimated profit,
compared with the 17.8 average multiple since Bloomberg began
compiling the weekly data in 2006. Trading volumes of companies
in the index were 23 percent higher than the 30-day average.
Thirty-day volatility in the gauge was at 17.8, lower than this
year’s average of 17.2.

The ruling communist party begins a once-a-decade
leadership transition with a congress set to start Nov. 8 in
Beijing, where Vice President Xi Jinping will probably become
head of the party. At the annual session of the legislature in
March, Xi is likely to succeed Hu Jintao as president and Vice
Premier Li Keqiang may succeed Wen Jiabao as premier.

“Investors are hopeful there’s going to be more measures
to boost the economy after the leadership change,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “We
can expect more liquidity after the congress.”

Property sales by floor area may increase about 20 from a
year earlier in October because of a lower base in the same
period last year, Yin Zi, a property analyst at Shenyin & Wanguo
Securities, wrote in a report today.

New home prices climbed 0.17 percent to 8,768 yuan ($1,405)
per square meter in October from September, a fifth month of
gains, SouFun Holdings Ltd., the country’s biggest real estate
website owner, said in an e-mailed statement today, based on its
survey of 100 cities. The growth rate was the same as in
September.

China Railway Group Ltd. (601390), the nation’s biggest construction
company by total assets, added 0.7 percent to 2.73 yuan. China
Railway Construction Corp., builder of more than half the
nation’s rail links since 1949, rose 1.6 percent to 5.10 yuan.

Rail Investment

Investment in railways may jump 96 percent this quarter
from a year earlier to 224 billion yuan should the railway
ministry want to meet annual investment target, Yang Tao and Xia Tian, analysts at Citic Securities Co., wrote in a report.